What is a “sustainable business”?
What does it mean for a business to be sustainable?
A business is sustainable if it can continue to exist by keeping doing what it’s doing. i.e. its activities can be sustained.
For me, this is about four pillars:
Financial sustainability
Innovation
Long term relationships
Environmental sustainability
1. Financial sustainability
A business can’t keep going if its revenues don’t cover its costs. A sustainable business:
Sells products / services that people want;
At a price they are willing to pay; and
At a price that covers the costs of running the business.
Ideally there’s a bit of profit to help deal with the unexpected and invest for the future (e.g. in innovation).
2. Innovation
If a business keeps on doing what it’s doing without responding to external changes it will probably become irrelevant.
A sustainable business adapts and evolves as the external world changes. For example as:
Customer / client requirements and expectations change
Regulations change
New competitors and alternatives appear
New technologies emerge and become the norm
3. Long term relationships
You can make a quick buck by taking advantage of the people you’re working with. For example, minimal customer service, poor quality products, beating down suppliers on price, treating employees as dispensable cogs in a machine.
A sustainable business builds long term relationships with all its stakeholders:
Employees
Suppliers
Customers / clients
The communities where it operates
This builds loyalty and means that the people the business works with want to keep on working with it, and will support it when times get tough.
4. Environmental sustainability
Many businesses have grown and been profitable by exploiting the environment. This isn’t long term sustainable - natural resources will run out or become severely depleted, waste will build up to a point where we can’t just keep adding to it.
Increased stakeholder pressures, regulation and the costs of increasingly scarce resources will expose exploitative business models. And, at a whole society level, we can’t keep operating forever and ever in the way we have been, reliant on externalising negative impacts.
A sustainable business:
Uses natural resources at a rate they can be replenished; and
Produces any waste (including carbon dioxide emissions) at a rate that it can be dealt with.
Applying the four pillars to your business strategy
As you build your business strategy, it’s important to consider all four pillars. This will help you identify areas of strength and areas where you should focus to ensure long term business sustainability.
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